The 5 most common mistakes made in raising capital.

Venture capitalists are professional investors that provide risk capital to start-up enterprises or to companies that are seeking funding to develop and expand their businesses.

Venture capitalists invest becausre they expect to earn a reasonable retun onn their funds when they balance risk and return.

For the start-up there are the right and wrong ways to present your business opportunity.

Converserly, for the venture capitalist discerning how to go about finding the right opportunity to invest your funds is no simple task.

Michael Pratt, an experienced venture capitalist and faculty member of University of Maryland’s Master of Technology Entrepreneurship, outlines the five commomn mistakes made when looking for venture capital.

Inadequate preparation
You don’t want to be inadequately prepared for a meeting with venture capitalists. Everything needs to be tight and focused so that you can prove that your business enterprise will be successful and profitable.

Paralysis by analysis
You need to hone your story and present it succently so it addresses the major topics tha a venture capitalist is interested in. Focus and succint are critical.

Ignorant of investors needs
Investors have specific needs and information requirements. You must identify, understand and address these needs. Put yourself in the position of a prospective investor.

Shotgun approach
Randomly sending out your start-up proposal to many venture capitalists, does not generate success or the results. You need to spend time and effort to research the venture capitalists who may be interested in your proposal.

Poor or ineffective management team
The management team that you have to drive the new start-up is critical and most important factor to any venture capitalist. The right idea without the right tem will not succeed. The investor wants to be assured that you have the team to execute the business plan.

Goldman Sachs’s push into lending is being led by Harit Talwar, a former top executive at the credit card giant Discover, who joined the bank last month. Credit Clarion Pictures
Goldman Sachs has spent 146 years largely as the bank of the powerful and privileged.

Now the Wall Street powerhouse is working on a new business line: providing loans that can help you consolidate your credit card debt or remodel your kitchen.

While the new consumer lending unit is still in the early planning stages, Goldman has ambitious plans to offer loans of a few thousand dollars to ordinary Americans and compete with Main Street banks and other lenders.

The new unit will offer the loans through a website or an app — functioning like a virtual bank in one of the oldest companies on Wall Street. Without the costs of bank branches and tellers, Goldman can lend the money at lower interest rates while still making a profit.

The company hopes to be ready to make its first loans next year, according to people briefed on its plans, who spoke on the condition of anonymity.

In devising its new strategy, Goldman is putting itself in league with start-ups that are similarly trying to use technology to disrupt the traditional business of finance. Unlike the media and retail industries, banking has been relatively slow to shed its bricks-and-mortar business model — a trend Silicon Valley and now Goldman are seeking to exploit.

But the new venture carries considerable risks. After the financial crisis, Goldman was vilified, accused of profiting while homeowners lost their properties to foreclosure. If the bank is too hard on its borrowers — suing a struggling family for unpaid debts, for example it could revive a popular image as a bank that earns profits at the expense of ordinary people.

The lending will also involve Goldman in a relatively risky business in which it has little experience, dealing with ordinary borrowers with limited financial cushions.
“Everything Goldman has done in the last 30 to 40 years has all been focused on the commercial side, or things that abut it very closely,” said Chris Kotowski, a bank analyst with Oppenheimer & Company. “I refuse to believe that hiring a couple of programmers and offering to make $15,000 loans online is a highly value-added banking strategy.”

Still, this new type of lending could help burnish the firm’s relevance to mainstream Americans.

The $840 billion consumer loan business is facing a shake-up as online upstarts like Lending Club, Prosper and even PayPal have begun offering small loans.
These outsiders have captured only a tiny slice of the market so far. But with their low overhead, they are convincing some analysts that they will be able to eat away at the businesses of old-school banks with the legacy costs of branches and tellers.
Jeffery Harte, a bank analyst at Sandler O’Neill & Partners, said, “Online lending has the potential to be quite disruptive to the way credit is extended.”

On Wall Street, Goldman has a reputation for spotting businesses that are being transformed and finding a way to seize the opportunity.

To the degree that Goldman can “assess the risk and price things electronically, it may be a low cost way of getting into the business,” Mr. Harte said.

The bank’s push into lending is being led by Harit Talwar, a former top executive at the credit card giant Discover, who joined Goldman last month.

In a sign of how seriously Goldman is treating the new venture, the company approached several top consumer finance executives about the job, which comes with the title of partner, a highly coveted position at Goldman, the people briefed on the matter said. The operation could have a staff of as many as 100 by the end of the year, they said.

Goldman declined to comment on the plan. But in a memo to employees announcing the hiring of Mr. Talwar last month, Goldman’s chief executive, Lloyd C. Blankfein, and its president, Gary D. Cohn, noted that “the traditional means by which financial services are delivered to consumers and small businesses is being fundamentally reshaped” by technology and the use of data and analytics.

Some of Goldman’s traditional business lines are under pressure. Sluggish markets and new regulations have diminished historically profitable areas like trading, forcing Goldman and other Wall Street companies to hunt for new sources of revenue.
Before the financial crisis, Wall Street firms were generally not permitted to do traditional consumer lending because they were not set up as federally insured banks. But as part of the government bailout in the 2008 crisis, Goldman and its archrival, Morgan Stanley, were required to become bank holding companies.

Since 2011, the two banks have talked about increasing their lending and have tripled the amount of outstanding loans — to $42 billion in the case of Goldman. Until now, though, they have focused on providing mortgages and credit lines to existing, generally very wealthy, clients.

With its new business, Goldman will take a very different approach, offering the types of loans that are traditionally pitched through mailing blasts to American homes.
The firm is probably going to focus on lending to customers who most likely would not come close to the $10 million minimum balance required to become one of Goldman’s private wealth clients. The loans would not be backed by collateral like a home or automobile, allowing Goldman to charge higher rates.

“When you are looking around at the universe of asset classes, there is still nothing better than unsecured American consumer debt,” said Nick Clements, a former banking executive at Barclays and Citigroup, who co-founded MagnifyMoney, a website that helps borrowers compare credit card and loan offers.

Goldman may eventually lend to small businesses, which have typically struggled to obtain bank loans.

The initial financing for the loans would come from certificates of deposit, which Goldman has been amassing in recent years. As the business grows, the bank may securitize the loans — bundle them and sell them to investors — to reduce some of the risk that it holds on its own books.

Goldman is still considering the details of the loans it will offer. In early discussions, the firm has been talking about making loans that would be about $15,000 to $20,000, people briefed on the conversation said. To distribute the money, Goldman is considering issuing a sort of prepaid card that could be drawn down each time the borrower buys something with it.

Goldman has not decided whether to attach its name to the loans or market them under another brand.

Consumer loans can be a fundamentally risky business even for a company with a reputation for deftly managing risk. Many people take out personal loans as a last resort to deal with cash flow problems at home or in their businesses.
“If you grow too fast in the personal loan business, you can get some bad surprises,” said William N. Callender, a managing director in the financial services practice of AlixPartners, an advisory firm.

Also, Goldman will have to overcome powerful forces that favor the incumbent Main Street banks. Even if Goldman can offer lower rates, consumers may still prefer credit cards to personal loans, simply out of habit.
“The biggest thing the banks have in their favor is inertia,” said Mr. Clements, the former consumer banking executive.

P2P and crowd equity funding services, where newly authorised services match lenders with borrowers and investors, launched in New Zealand last year.

Horizon Research, in turn, has launched the country’s most in-depth monitor on the market’s performance and New Zealanders’ intentions to borrow and lend through it.

Horizon says results from nationwide surveys in August 2014 and March 2015 indicate that,overall, the amount being sought by those who said they were definitely likely to borrow through a peer-to-peer lending service in the next 12 months is $7.27 billion.

Horizon says its research service will allow market players to maximise performance and, in the case of traditional lenders and regulators, identify risks.

Awareness:
Results show the number who felt they did not know much about peer to peer lending or crowd equity funding has fallen 10% between August 2014 and March 2015 but the sector has a long way to go to lift numbers who feel “fully informed” from a base of 2.7%.

Borrowing overall:

This research profiles the 27% of adults, equivalent to 261,000 New Zealanders, who indicated they were likely to borrow money in the next 24 months, by 19 demographic criteria. It finds a further 198,000 indicating they will borrow in the next 13-24 months and 396,300 in the next 12 and 13 to 24 months.

Amounts to be borrowed are primarily either under $15,000 or in the $100,000 to $499,999 range. Respondents who indicated they were definitely looking to borrow, regardless of the timeframe, were more likely than average to be looking to borrow in the $500,000 to $999,999 range and were looking to borrow, on average, twice as much as those who said they may borrow.

Borrowing through a peer-to-peer lending service:
The research finds 237,800 adults would “definitely” be likely and who “may” borrow through a peer-to-peer lending service in the next 1 to 12.

Overall, the amount being sought by those who said they were definitely likely to borrow through a peer-to-peer lending service in the next 12 months was $7.27 billion.

The four key purposes for borrowing using a peer-to-peer lending service in the next 12 months are identified by this research.

Lending through a peer-to-peer lending service or crowd equity funding:
The research identifies and profiles the number of adults who are definitely likely and likely to lend through a peer-to-peer lending service or crowd equity funding at some time in the next 12 months. It tracks increasing likelihood between August 2014 and March 2015 and finds the potential lending intention is 5% higher “next year” than in the next 12 months. This will help market participants to profile and target potential lenders.

Overall, those who said they were definitely likely to lend through a peer-to-peer lending service or crowd equity funding were prepared to lend the amount of money being sought by in the next 12 months was $1.54 billion – equivalent to 21% of the $7.27 billion sought by those who would definitely borrow through peer-to-peer lending.
Potential lenders indicate what purposes (personal and business) they are prepared to lend for and the business life stages preferred by those likely to lend to businesses.

Risk tolerance profiles:
The research measures the degree of risk New Zealanders will tolerate when making major financial decisions. This includes the degree of comfort and discomfort with rates of fall in the value of their investments.

In general, age was not a strong determinant of preparedness to take financial risks.
Important factors in peer to peer lending or crowd equity funding:

To help market players respond best to the this major new potential market, the research rates the importance of 30 factors related to peer to peer lending or crowd equity funding, and finds the six factors rated more highly as “very important” than the others.
The research identifies which of the companies, if any, they would consider using for peer to peer lending or crowd equity funding services (respondents were asked to base this on their knowledge of the companies or from first impressions based on the company names.

Banks and peer-to-peer lending:
The research indicates the number of adults likely to use a peer-to-peer lending service if the bank respondents used most often for personal loans were to start one. A potentially significant market of more than 287,000 people is indicated, along with a risk to P2P lenders, however 60% of those who had said they may borrow through a peer-to-peer service in the next 12 months appeared to be likely to use their bank if it offered peer-to-peer lending.

Financial Markets Authority supervision:
The research reports the number who has or lack confidence in the Financial Markets Authority to adequately supervise new peer to peer lending and crowd funding service.
Business decision makers were significantly more likely than average to not feel confident, with 52.5% indicating a lack of confidence.

Overall feelings about peer-to-peer lending and crowd equity funding:
41% of respondents felt that the start of licensed peer to peer lending and crowd equity funding service providers in New Zealand was a welcome alternative.
25% said they would not borrow through a peer-to-peer or crowd funding service.
A nett 51% selected one or more options related to negative perceptions of safety, risk or trust saying they would feel safer investing through banks and using other ways of saving; that P2P and crow equity funding were too risky, or they lacked trust in peer-to-peer lending.

Horizon’s current Peer to Peer Lending and Crowd Equity Finding Market Monitor report is based on:
• A survey of 2214 respondents undertaken between 29 July and 11 August. This survey sought the views of New Zealanders 18+ on peer-to-peer lending and had a maximum margin of error at a 95% confidence level of ±2.1% overall.

• A tracking survey of 2160 respondents undertaken between 19 and 26 March 2015. This survey tracked awareness and likelihood to borrow or lend through peer-to-peer lending or crowd funding organisations and has a maximum margin of error at a 95% confidence level of ±2.2% overall.

Changes to Aussie employee share schemes for start-up companies came into effect from 1st July 2015

Employee share schemes (ESS) provide an opportunity for employees to receive shares (or options to buy shares) in the company they work for.

The Australian government has made changes to the tax rules for employee share schemes to make it more attractive to employers and employees to participate, including a new concession for start-up companies.

Changes to employee share schemes include:

when options are taxed

increasing the maximum ownership limit to 10% of the total shares (up from 5%)

increasing the deferral period to 15 years (up from seven years) for tax deferred schemes.

Additional concessions for start-up companies
Under the new rules if shares are acquired in a start-up at a discount of up to 15% (relative to market value), then the discount is exempt from income tax. The shares will only be subject to capital gains tax on disposal.

What is a start-up?
Start-up companies, from any industry, need to:
be incorporated for less than 10 years
be an Australian resident company
have no equity interests listed on an approved stock exchange
have an aggregated turnover less than $50 million.

What you need to know?
The Australian government have published a guide for employers and standard templates for start-up companies to help you develop and maintain an employee share scheme. We have also developed a guide for employees to help them in making decisions to participate.

Aussie small businesses – Instant tax deduction – asset threshold increase to $20,000 is now law

Small businesses can obtain an immediate tax deduction for assets acquired costing less than $20,000 purchased since 7.30pm 12 May 2015.

You can use the new threshold amounts in claiming deductions in your 2015 income tax return. The deduction is claimed in the income year in which the asset is first used or installed ready for use.

What’s changed?
The instant asset write-off threshold has increased to $20,000 (up from $1,000). This allows you to immediately deduct the business use portion of a depreciating asset that costs less than $20,000.

The changes apply to assets acquired after 7.30pm on 12 May 2015 until 30 June 2017,
on a per asset basis, so several assets each costing less than $20,000 would qualify,
to new and second hand assets.

Assets that cost $20,000 or more (which can’t be immediately deducted) will continue to be deducted over time using a small business pool.

The low pool value threshold will also increase to $20,000. This means that an immediate deduction is available if the pool balance is less than $20,000 at the end of an income year.

What’s not included?
There are a small number of assets that aren’t eligible for accelerated depreciation, for example horticultural plants that have specialised depreciation rules.

Record keeping
Just like any other business asset, you’ll need to keep records to support any claims for a deduction. This includes the ongoing business use of an asset and its eventual disposal. The ATO has a risk-based program to identify taxpayers that are not meeting their obligations and will take measured approaches to influence taxpayer behaviour.

Find out more at:- ato.gov.au
Growing Jobs and Small Business – expanding accelerated depreciation for small businesses

funding4business – technology shocks coming for Ausssie banking

The Murray Financial Inquiry of 2014 into Australia’s financial systems has predicted that technology changes and market disruptors using new technologies will have the largest influence on changing the banking system in Australia, as we know it.

At the forefront of this change is the emergence of peer-to-peer crowdfunding in Australia.

Charles Moldow, General Partner, Foundation Capital in the USA, in a recent report titled “A Trillion Dollar Market by the People, for the People”, claims that “peer-to-peer marketplace lending will over the next few years, remake banking as we know it”.

Today technology and innovation are making possible a new generation of financial services that are more affordable and more available. That’s why Moldow, believes that “marketplace lending” will evolve to be a trillion dollar “market by the people, for the people”.

Foundation Capital predicts that by 2025 $1 trillion in loans will be originated in this manner globally.

The peer-to-peer crowdfunding industry rose to prominence in the USA & UK during the onset of the Global Financial Crisis in 2008, plugging a hole left by the reluctance of cash-strapped banks to lend to small businesses.

Consequently it has created an opportunity for non-traditional lenders through peer-to-peer platforms to cater to the growing demand for alternative business financing options and directly connecting borrowers and investors

For the first time in banking, the online marketplace makes it possible for a third party to match financial supply and demand. As a result, lenders and borrowers can now find one another and agree to loan terms, all without the involvement of retail banks or credit card companies.

The San Francisco based LendingClub Corp, one of the USA’s largest operators in the online peer-to-peer marketplace, has facilitated more than US$5 billion in loans since its launch during the GFC in 2007. This shift to a peer-to-peer crowdfunding is not unique to the USA.

The major UK networks providing these investment options include, Funding Circle, CrowdCube, Zopa and RebuildingSociety. Funding Circle alone has facilitated over GBP400 million in business loans in the UK over the four years since establishment.

Minister for Small Business Bruce Billson endorses peer-to-peer crowdfunding

The Hon. Bruce Billson the Federal Minister of Small Business reinforced the government’s commitment to supporting peer-to-peer crowdfunding at a presentation at the Australian Stock Exchange (ASX) on 30th April 2015, whilst launching an independent report titled:-

The Federal government sees crowdfunding as a way forward into breaking the stranglehold of the major banks in the provision of finance to small businesses, and will introduce new legislation in the Budget Session to make the process easier for lenders and borrowers.

The peer-to-peer crowdfunding industry rose to prominence in the USA & UK during the onset of the Global Financial Crisis in 2008, plugging a hole left by the reluctance of banks to lend to small businesses. Securing finance from the banks in Australia today is no different.

However, the arrival of crowdfunding on-line marketplaces in Australia and New Zealand is providing a viable alternative to small businesses who are seeking business loans. It enables them to explore alternative sources of funding and bypass the banks and middlemen.

With true peer-to-peer crowdfunding there are no banks and no middlemen, and the Internet based marketplaces enables farmers and rural businesses borrowers to connect to lenders and investors directly, by searching and matching on appropriate investing and borrowing criteria.

Once a suitable match is identified, the business borrowers and lenders/investors can optionally exchange contact details, discuss and potentially negotiate the terms and conditions of a possible loan or investment on mutually acceptable terms.

funding4business is one such peer-to-peer marketplace and lists business requiring loans, start-ups requiring seed or equity funding, investors and private lenders seeking secure investments for their available funds.

We are not a bank nor a finance company and we do not lend and or administer loans.

We operate the marketplace and facilitate introductions.

funding4business allows lenders and investors to achieve better returns on their investment funds, while potentially offering lower than bank interest rates for borrowers. Investors choose the risk they want to take and the borrowers with whom they feel comfortable and secure and visa versa.

NEW! Get your Business Health Check!

Your business health score is based on an analysis of the standard business performance ratios that apply to your business such as; Working Capital Ratio, Profitability Ratio, Inventory Turnover Ratio, Debt Ratio and other parameters.

Your Business Health Score will provide a guide for you and prospective lenders and/or investors as to the health and ongoing viability of your enterprise.

A per-requisite of your business health check, is to have your business loan requirements listed in the funding4business marketplace.

NEW! Get Business Mentoring and Advisory Services!

Need help with your business? Need advice on cash-flow management?

Then you can hire one of our business advisers for an hour, for a day, or for a month.

They can help you in preparing business plans, cash flow analysis, sales and revenue forecasting, or negotiating a business loan on your behalf.

They can provide independent objective advice and provide an external view on your business and any issues you are facing.

Real estate Crowdfunding set to top US$2.5 Billion this year

Entrepreneur Magazine
Catherine Clifford – 4th March, 2015

Real-estate crowdfunding was a $1 billion industry in the USA in 2014 and is expected to grow to more than $2.5 billion this year, according to a report released today from USA industry research firm Massolution.

Across the globe, investors and homebuyers are using crowdfunding as a way to own and profit off of commercial real estate or to finance the purchase of their own homes. In 2014, USA crowdfunding campaigns ranged in size from less than $100,000 to over $25 million.

When most people think about crowdfunding, they’re likely to think of a group of friends pulling their finances together to back the launch of a new indie film or a wallet made out of duct tape.

While still emerging, the real-estate crowdfunding industry is growing quickly. To date, there are 85 real-estate crowdfunding platforms currently in operation, according to Massolution.

“Residential crowdfunding has the breakout potential, as mortgage loan origination, a trillion dollar market, is opening up to distributed platform financing,” the report says. One example of residential real estate crowdfunding is LendInvest, a platform out of the U.K. that did $240 million worth of residential mortgage loan initiations last year.
Property investors are using real-estate crowdfunding as an alternative way to invest money they are looking to make money with. For example, on USA platforms such as Realty Mogul, many investors pool their money to buy a commercial real-estate investment with the expectation that the rate of return on their investment will be higher, with less risk, than other typical investment alternatives.

The benefit of real-estate equity crowdfunding over real estate investment trusts, or REITs, which have already been around for two decades now, is speed and diversity. “Technology allows this activity to be conducted more swiftly and more efficiently, availing the investment opportunity to more participants,” the report says.

Crowdfunding for commercial and industrial investments is growing faster than it is for residential or multi-family real estate investments, according to the report. Still, crowdfunding is being used as an alternative finance method to a mortgage from a bank for individuals looking to move into their first home. And there is significant potential in this sliver of the real-estate crowdfunding market.

funding4business recognised this emerging trend into on-line and Internet based financial services and was specifically established to facilitate peer-to-peer start-up funding and business loans to Aussie businesses.

funding4business enables crowdfunded property investments – today

We are an Aussie company, with an Aussie team, applying Aussie developed technology and know-how, to an emerging P2P alternative investment and financial marketplace for the benefit of Aussie business borrowers and Aussie investors.

We connect business borrowers with investors such as SMSFs, HNWIs, SIVs and PIVs holders for their mutual benefit.

Peer-to-peer (P2P) lending acts as a flexible investment alternative where established businesses can borrow funds and negotiate business loans directly with willing investors at mutually acceptable investment rates, terms and conditions.